How to choose a financial adviser as the crisis fuels new drive to guard wealth

Crashing stock markets and fresh fears for the eurozone have had many reaching for the phone. They want to talk to their financial adviser and be reassured that, however apocalyptic the headlines, their money is safe.

Analysis of internet searches shows that with every new phase of crisis comes a surge in consumers’ search for information and advice.

The highest volume of online searches for ‘savings’, ‘investments’ and ‘advice’ came in late 2008 after the collapse of Icesave and the rescues of Bradford & Bingley, Halifax and Alliance & Leicester.

Won over: Julian Mitchell with wife Rachel, who is expecting their first child next month

Last week searches for these terms were again on the rise, as private savers responded to stock market volatility and renewed anxiety over Spain and Greece.

Despite these periods of panic, an authoritative report shows only 18 per cent of us actually receive and pay for independent financial advice. But it shows that while the industry still has its problems – Financial Mail has for years highlighted many cases of rogue advisers and their mis-selling – the public is warming to the idea of truly independent advice.

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The Value of Advice report by unbiased.co.uk, an online directory of professional services, shows that independent advice also appears to pay for itself in terms of delivering savers better returns from their savings and better outcomes in their overall financial planning.

New breed: Georgina Partridge of Plutus Wealth

Advice also appears to substantially change savers’ behaviour. Investors who take advice are, for instance, less likely to act in panic when as now financial crises dominate the news.

The survey, of more than 1,000 adults, found those who took advice saved more than those who did not, even when incomes were the same.The advised group put about 30 per cent more into their pensions. Other non-pension savings and investments were worth, on average, £40,000 more among the advised group than among those not taking advice.

The savings of the advised group also appeared to perform better, leading to them having pension pots at retirement roughly twice the size of those who sought no advice. This was possibly because the advised group of savers put about twice as much into riskier investments such as shares and funds. These pose risks to capital, but in the long term outperform deposits or cash Isas. But the public is wary of advisers, anxious about how much they cost and uncertain of how they operate.

Georgina Partridge of Plutus Wealth in the City of London is one of a new breed of young, highly qualified independent advisers. She focuses mainly on investment and pension planning for clients of various ages.

‘Many are nervous about how much advice will cost, but most are aware they will have to pay something,’ she says. ‘Like us, most advisers will conduct a first exploration meeting at their own expense. There is no commitment at that stage, which hopefully makes people more at ease. It is never awkward. I think the fear is actually in making the commitment of coming in. Once people are here and see the adviser is a normal, friendly and approachable person, their fears are put to rest.’

The level and amount of advice that people need varies according to their circumstances and wealth. Partridge says: ‘Most advisers offer different levels of service starting at an entry level allowing those who are new to financial planning and who might have very little disposable income to be able to benefit from advice – right through to sophisticated investors whose financial situations may be complex and require more time and attention. We provide a clear document for the client to take away at the first meeting that explains the charges and what they should expect to receive for that charge.’

Some people, says Minesh Patel of EA Financial Solutions, in Finchley, north London, want help with a particular transaction, such as purchasing an annuity.

Long-term view: Adviser Minesh Patel

‘But it usually works best where we have a longer-term relationship with clients,’ he says. ‘That way we can help them through various stages of life: while assets are being built up, during their careers, and then on into retirement.’

Among his clients are Julian and Rachel Mitchell. The couple, both 40, from Milton Keynes, Buckinghamshire, founded their marketing business, Digital Annexe, in Clerkenwell, central London, six years ago.

Julian says: ‘I don’t have a lot of trust in financial services. We found Minesh soon after setting up our business as I wanted help in establishing pension plans for our employees. I really wanted him to be independent of other financial firms, which he is. He’s gained our trust over time.’

Patel now helps the Mitchells with wider aspects of their personal and business financial planning. ‘Our business is part of our lifestyle and wealth,’ Julian says. ‘We want to improve both. But when you’re running a company and focusing on day-to-day demands, you lose sight of the bigger picture.

‘I probably talk to Minesh once a month. He has a range of clients in a number of fields, giving him insights that he can share with me. I regard him as a colleague and friend.’

Independent advisers may charge hourly, where rates will vary according to experience and by region. Expect to pay between £90 and £200 an hour, and possibly more where a specialist is needed.

Some will charge an ongoing percentage of the money invested, which is likely to be between 0.5 per cent and 1.25 per cent a year of your funds. Other advisers may levy a ‘project fee’ for one-off arrangements, such as setting up a trust for inheritance tax purposes.

FOUR TIPS TO FINDING THE RIGHT GUIDANCE

Research online to draw up a shortlist of potential advisers working near you. Start by using adviser directories on unbiased.co.uk (a source of independent financial advisers and other professionals) and financialplanning.org.uk (for details of financial planners).

Narrow your shortlist of businesses by looking at their websites. All will be regulated by the Financial Services Authority, but not all will have the same qualifications or specialist areas. Big firms are not necessarily better than small ones. Planners with chartered status are among the most highly qualified, but there is a vast range of qualifications awarded by a number of bodies. Descriptions of all qualifications are available at unbiased.co.uk/ifa-qualifications.

Phone several of your preferred choices to see whether it is worth setting up a meeting. Do they deal regularly with people in your circumstances? Will they offer an initial meeting free of charge? And on what basis would they charge if you continue to do business with them after that? You may end up sharing intimate information with your adviser, so it is important you get on. Would you prefer to deal with a woman? Many do and there are growing numbers of highly qualified female advisers.

Meet for an introductory session. Most will offer a free initial meeting of an hour or so where you can outline your circumstances and requirements and both parties can decide whether they’d like to work together. Take your spouse or partner, even if one of you is likely to be the main person dealing with money matters thereafter. Make sure you understand what the adviser is qualified to do. Is he ‘independent’ and able to recommend all products? Or is he ‘restricted’ and advising only on a limited range of investments or policies? Good advisers are comfortable talking about their costs.

We have a much better deal than if we had done everything ourselves

Divorce, an accident, a death in the family – these are some of the events that can give rise to the need for financial advice. But nearly everyone needs expert guidance on retirement.

Minesh Patel of EA Financial Solutions in Finchley, north London, says: ‘Most people who have worked and saved in some way or other reach a point where they cut back on their hours, or stop work altogether, and need to draw on their pensions and savings. That is where most people require help and where advice can be enormously beneficial.’

Pension boost: Elizabeth and George Kay secured an annuity paying about ten per cent a year compared with a more usual four or five per cent

The complex – and constantly changing – pensions maze means few people can confidently navigate the transition from earning a wage to taking a pension. Most employees have a mix of works schemes, private plans or other savings that must be arranged to maximise the income they can produce on retirement. Tax rules, your health, the needs of a spouse or partner and State pension entitlements are just a few of the factors that require consideration.

Elizabeth and George Kay live in Eyemouth, Berwickshire, where for many years they ran a hairdressing business. They sold it ten years ago and after that Elizabeth, 67, worked in a residential home while George, 65 last week, worked for a trust helping youngsters with learning difficulties.

Like most people close to retirement, their finances were in a muddle. ‘We had four different pension plans,’ says Elizabeth. ‘I discovered you needn’t take an annuity offered by your pension provider, but you could shop around for a better rate. But that was about as far as I got.’

The couple turned to Graeme Mitchell of Lowland Financial in nearby Galashiels. He specialises in retirement planning and was able to spot that in one of their pension plans there was an extremely generous, but easily overlooked, guaranteed annuity rate. By spotting this, and advising them to take it up, the Kays secured an annuity paying about ten per cent a year compared with a more usual four or five per cent.

Using their other three pension plans, Mitchell secured other ‘enhanced’ annuity rates. George qualified because he is on medication for high blood pressure. The couple are receiving substantially more in retirement than had they managed their affairs themselves.

Elizabeth says: ‘Advice is so important at this stage – these are decisions you cannot reverse.’ Mitchell says: ‘The Kays did the hard work, putting money by all those years. My job was to make sure they got the most from it.’

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How to choose a financial adviser as the crisis fuels new drive to guard wealth